Series 7 Flashcards
-utilities, groceries, pharmaceuticals
-doesn’t move with market
-inelastic
Defensive stock
-airlines, automobiles, cement
-go up and down along with market
Cyclical Stocks
-Procter and Gamble, IBM, Union Pacific
-reliable with consistent dividends
-often higher priced
Blue Chip Stocks
-smaller dividends
-capital reinvesting
-good prices
Growth Stocks
-AT&T
-some mature companies pay put most of their earnings as dividends
-larger dividend
Income Stocks
-Insurance, commercial banks, housing
-sensitive to interest rates
-housing industry, construction
Interest Sensitive Stock
-trade at lower price based on historical earning and asset value
Value Stocks
-Facebook, apple, amazon, Netflix, google
-companies leading in innovation and technology
New Economy Stocks
-communication, software, IT services
-companies involved in distribution/technology of goods and services
Tech Stock
-Affordable Housing, renewable energy, sustainable agriculture,
-moral and ethics beliefs guide investment decision
S&P Global 1200 ESG Index (Apple, J&J, Exxon Mobile)
Socially Responsible and Impact Stock
-when a corp. is formed, its corp. charter authorizes that a fixed number of common shares be issued
-assigned an arbitrary par value of usually $1
Authorized Stock
outstanding shares x current market price
Mega Cap $200 Billion+
Large cap $10 Billion +
Mid Cap $2-10 Billion
Small Cap $300M-2 Billion
Micro <$50M
Market Capitalization(market cap)
-maintains ownership records
-maintain the integrity of the record of all shareholder names and addresses
-issuing new stock certificates
-canceling old stock certificates
can send bondholder interest when payments are due and the redeemed principal at maturity
Transfer agent
-audits and oversees the transfer agent
Registar
-shareholders have right to keep proportional ownership if company chooses to issue more shares
-do this by offering separate securities called rights (reduced price) (usually expire in 30-60 days)
-can sell rights to another investor
-protects shareholder from their shares being diluted
Pre-emptive Rights
-most common
-votes must be evenly cast
-3 BOD seats, 100 shares = 300 votes (100x3) shareholder could cast exactly 100 votes for any candidate, if the only wanted to vote for 1 they could only cast 100 votes.
Statutory Voting
- shareholder may divide their total votes in whatever manner
-3 BOD seats, 100 shares = 300 votes, can choose to do all 300 votes for 1 candidate or cast 200 for 1 and 100 for another
-advantage for small investor to have more influence
Cumulative Voting
-if shareholder cannot attend meeting, they are granted a POA to cast votes on their behalf
Proxy Voting
-$100 par
-no voting or preemptive rights
-market value does not affect dividend rate (fixed)
-must be paid prior to common on liquidation and dividends
-less risky less growth
-fluctuates with interest rates and issuers creditworthiness
-dividends are always paid based on par
types are cumulative, adjustable, variable, callable, convertible, participating
-market value based primarily on rising and falling interest rates
has equity
Preferred Stock
-vehicle for trading foreign securities in US
–registered with SEC
-sold in US with US $
-no voting or preemptive rights
-exchange rate risk (currency risk)
-issued by U.S Banks
-investor would invest if they believed us. $ would weaken and buying this Secuity will enhance the value of dividends paid
-pays dividends is only US dollar
can NOT vote for BOD
-receive cash value for preemptive rights
-trade on national stock exchanges
-market prices subject to foreign currency exchange fluctuations
-exchange listed ADRs MUST be sponsored
American Depository Receipts (ADR)
-considered sweeteners for new issues to make them more attractive to investors
-long term stock option to buy stock at a fixed price above market price when it is issued
-only valuable when stock rises
-can be traded
-no intrinsic value but significant time value since above market price
perpetual … have no expiration
-no preemptive rights
-considered “underwater”
-raises additional money if exercised
-help lower the interest cost on issue
-warrants valuations are directly influenced by market price of common stock
-value of warrant varies with price movement
-equity security
-trade separately from the stock of the company
Warrants
-certificates issued to the bondholder with owner’s name printed on them and no coupons attached
-can be transfered to another individual only after owner endorses the bond
-been largely replaced by book-entry
Registered Bonds
-every bond has same interest rate and maturity
-corporate bond issues and us gov. bond issues typically are done this way
Term Bond
-stated par value with coupon rate of 0
-no interest payments made
-bond purchased at a discount and redeemed upon maturity at par value
very sensitive to interest rate risk
-may have tax consequences regardless of gains
Zero Coupon Bond